Ramping Up Revenue
Growing revenue and maximizing profit can be a tricky task for club owners to navigate.
Deciding what programs and amenities to invest in, creating a long-term plan, and maximizing profit per square foot are not easy.
Here are aspects to consider to get the most bang for your buck from Larry Conner, the president and general manager of Stone Creek Club & Spa in Covington, Louisiana:
Programs and Amenities
Conner said clubs need to take notice of what boutiques have showcased — that is, to treat every part of their business as their only business. “Each department needs to run the best it can to make the whole club run the best it can,” he explained. “Sometimes this is done with a direct profit or by being an amenity that brings additional business to the club.”
Before Stone Creek Club & Spa makes any big decisions affecting a department, staff run it by their strategic team made up of managers and assistant managers. The team hears all the pros and cons to consider before making a final decision. Conner said this has worked well and engaged more employees in the business.
One key Stone Creek Club & Spa has focused on to maximize profits is its staff. “The top two reasons members tell us why they joined our club are our customer service and cleanliness,” said Conner. “So, the best bang for our buck is to invest in our team — in their education, their training and in keeping them happy.”
When you stop investing in your main product, your business will suffer. In fact, for Stone Creek Club & Spa, its main product is the service its team delivers. “We raise our dues every year or two — 2 to 3% on an annual basis — to make sure we can keep delivering this great product, and our members do not complain,” explained Conner. “They appreciate the product, and they know it takes money to keep it going.”
Outside of investing in great staff, ancillary services — like food and beverage — are another way to increase profit per square foot. However, they must be executed correctly. According to Conner, food and beverage in particular is hard for most clubs to succeed at.
“Very few clubs make money at it, but if done right, it is not only a good amenity to have, it can also be one that attracts visits to the club,” said Conner.
Conner advised hiring an operator who gets your club’s big picture and works toward that goal for your club. “The hotel industry has done this well,” he said. “Look for people who are experienced in this area to run food and beverage operations in your club.”
Profit Per Square Foot
Rather than just focusing on programs, amenities and strict revenues, clubs should also focus on profit per square foot.
“As an industry, when we are looking to increase our bottom line, we focus way too much time on revenue,” he explained. “Revenue normally does not go 100% to the bottom line because most revenue has expenses associated with it.”
According to Conner, a cut in expenses will normally carry 100% to the bottom line. Clubs should focus on cutting expenses where possible, or revenue that does not carry a large amount of expenses with them, such as dues. “Also, use every square inch of your club for your business — make sure all spaces have a defined use that make sense, and get rid of or reuse dead areas,” he said.
For most clubs, increasing profit is all about the dues. If you bring in more members in a mature club, a large percentage of dues — if not all of them — go straight to the bottom line. “The ancillary departmental businesses are good and can improve that bottom line, but it is still mostly about the dues,” said Conner. “Whatever you do, deliver at that level or above of your dues’ value and you will build a demand for your business.”
Conner explained sometimes operators spend too much of their time with ancillary businesses, trying to squeeze everything they can out of them. “Instead of that, the better answer may be to run these areas well and use them to attract visits or business to the club and build up dues,” he said. “Give a little on the profit margins to strengthen the club as a whole.”
While there are a variety of options to increase profit and revenue, it is easy to make mistakes. Playing the short game and not looking at long-term effects is a common misstep. “I see a lot of clubs chasing things, quickly dealing in programs or systems, but not seeing this will not hold traction in the long run and can waste time or money,” explained Conner. “It is OK to invest in these, but plan and spend according to where it will end.”
Overall, when it comes to ramping up your club’s revenue, always think about the big picture — don’t drown in data.
“The only good data is the data you actually do something with to strengthen your business,” said Conner. “Sometimes the data you get by being a part of your business instead of just watching it from the back room can mean the difference between delivering experiences for your members that will mean something, compared to just another experience you want them to forget.”